Yeah. I think the problem boils down to, if a sprite is given velocity while exactly next to an immovable body, it will move one pixel inside of the body and then get pushed back out on the next frame. So if you hold the direction key the character will continuously move back and forth in and out of the wall and will look very blurry/jittery.
It seems to be a problem with the scaling because this doesn't happen if everything stays at x1 scale.

If my sprite's scale is set to 1, there is no jitter in the collisions. I need to scale everything in the game to x2 scale.
My player moves by setting body.velocity.x to 200 as long as I am pressing the right arrow key. When this collides with an immovable body the player jitters back and forth 1 pixel every frame.
I would expect this to be a very common problem, but I can't seem to find anyone talking about it anywhere. However, I did find an old topic on this issue with a solution that did not work for me: